KOLKATA: Gold sales during Navratri and Dussehra halved this year as fear of the taxman’s scrutiny of prosperous customers cast a shadow on the festive spirit, leaving jewellers sombre in the peak period of their business.

High-value customers, who dominate the market at the start of the festive season, kept away this year because the government extended the ‘know your customer’ (KYC) norms to all purchases above Rs 50,000. Customers who make small purchases usually do so later in the season, bankers and jewellers said.

While sales of cars, TVs and refrigerators jumped more than 15 per cent this Navratri and Dussehra from last year, suggesting bumper business in the run-up to Diwali, the gold market is gloomy.

“Sales are down 50 per cent though we had expected some good demand this Navratri and Dussehra. As things stand today, we are not sure whether the trade will be able to make good business in the current festive season. The high-value gold sales are not happening,” said Nitin Khandelwal, chairman, All India Gems & Jewellery Trade Federation (GJF).

Gold traders are concerned that gold sales would be lacklustre even in Dhanteras, when purchase of the precious metal is considered auspicious.

Mehul Choksi, chairman, Gitanjali group, said people were buying gold items that are below Rs 50,000.

“Highvalue customers are missing. The new rule will definitely affect Dhanteras sales this year,” he said.

Joy Alukkas, chairman of jewellery retail major Joyalukkas, said his firm is now focusing on smaller items to attract customers. “Highvalue sales is not happening. We are therefore focusing on small pendants, small earrings and other such items. The KYC norms will affect sales during Dhanteras, when Indians splurge on gold.”

Traders said lower demand at the beginning of the festive season and entry of gold through the unofficial route has made the yellow metal available at a discount of $8-10 per troy ounce unlike last year when there was a premium on gold during this time. High import duty of 10 per cent and a 3 per cent goods and services tax on gold has reignited the grey market, they said. Jewellers said demand picks up if gold prices show an upward trend.

Gold has climbed by almost 10 per cent this calendar year as international prices increased on account of geo-political tension and reduced chances of a further hike in US interest rate.

“Ideally, this should trigger buying among people. But the government’s move to crack down on money laundering and the issues related to goods and services tax have spoiled demand. The outlook is not very positive for the ongoing festive season,” said Khandelwal.

While the crackdown on money laundering is being considered as a major reason for a drop in sales during Navratri and Dussehra, bankers like Shekhar Bhandari, business head for global transaction (banking and precious metals) at Kotak Mahindra, feels customers prefer non-gold products.

“Gold is not the priority on their list,” Bhandari said.

“Following the government’s notification on cash transaction of Rs 50,000, we are seeing that jewellers are sourcing goods in cash and unorganised market is fast shifting to cash sales and purchase,” said Rajiv Popley, director of Mumbai-based jewellery firm Popley & Sons said. The World Gold Council has put India’s yellow metal demand for calendar year 2017 at between 650 tonnes and 750 tonnes.

India’s gold demand for 2016 fell sharply by 21 per cent to 676 tonnes from 857 tonnes in 2015.

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